CAA CAA Financial Management & Ethics

Question 1

Which financial ratio measures a company's ability to meet short-term obligations using its most liquid assets?

Accepted Answer

Quick ratio

Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Return on assets

Question 2

Under the AICPA Code of Professional Conduct, which principle requires a CPA to be straightforward and honest in professional relationships?

Accepted Answer

Integrity

Answer

Objectivity

Answer

Due care

Answer

Confidentiality

Question 3

The weighted average cost of capital (WACC) is best described as:

Accepted Answer

The average return required by all of a company's capital providers, weighted by their proportions

Answer

The cost of equity financing only

Answer

The interest rate on long-term debt

Answer

The risk-free rate plus a market premium

Question 4

Which capital budgeting method calculates the discount rate at which the net present value of a project equals zero?

Accepted Answer

Internal rate of return (IRR)

Answer

Payback period

Answer

Accounting rate of return

Answer

Net present value (NPV)

Question 5

A certified accounting analyst discovers a material misstatement in financial statements that management refuses to correct. What is the most appropriate next step?

Accepted Answer

Escalate to those charged with governance (e.g., audit committee)

Answer

Ignore the issue to maintain client relations

Answer

Issue an unmodified audit opinion

Answer

Immediately resign without further action

Question 6

Which of the following is an example of an operating activity in the cash flow statement under US GAAP?

Accepted Answer

Cash received from customers

Answer

Issuance of common stock

Answer

Purchase of equipment

Answer

Payment of dividends